Playing with taxes
Published January 1, 2015
Editorial by Greensboro News-Record, December 31, 2014.
Taxes continue to come down in North Carolina, and so do state revenues. According to leaders in Raleigh, this is driving an economic comeback.
It also explains why the same leaders can’t afford to give all teachers a pay raise, fund growth at state universities or keep all roads and bridges in good repair.
The cut in the corporate income-tax rate has been most dramatic. It stood at 6.9 percent last year, dropped to 6 percent this year and slides to 5 percent beginning Thursday. In theory, the money businesses save allows them to hire more employees or make capital investments. A lower tax rate also entices other businesses to move to North Carolina. All that actually generates more tax revenue in the long term.
North Carolina’s employment statistics are moving in the right direction. The number of people working in the private sector grew by nearly 111,000 from November 2013 to November 2014, and the unemployment rate plunged to the national average of 5.8 percent.
Corporate income-tax collections for the current fiscal year were down about 7 percent from the previous year, however, according to the Office of State Controller.
The bigger drop has been in personal income-tax collections — down 14 percent.
Personal income-tax rates in 2013 were 7.75 percent, 7 percent and 6 percent. They were cut to a uniform 5.8 percent in 2014 — giving substantial savings to earners at the top level, a nice break to middle-income earners and very little to low-wage workers.
Thursday, the rate edges down to 5.75 percent, a 0.05 percentage point trim that almost no one will notice — except, perhaps, at the Department of Revenue.
Sales- and use-tax collections, meanwhile, were substantially up through November — 17 percent. Total revenue from consumption taxes could overtake personal income taxes as the legislature continues to broaden the reach of items subject to taxation.
Overall, however, the Office of State Controller noted that net tax and non-tax revenues were down by 5 percent, or more than $400 million, through November from a year earlier. That was more than twice the drop that budgeters anticipated.
Maybe this will spur even more economic growth. At the same time, it’s odd to see such sharp declines in tax revenue when the state is experiencing more economic activity and continued population growth.
Concerns are also raised that vital needs can’t be met when the state has less money. If tax-rate cuts don’t spark enough new business activity to actually generate more tax revenue, North Carolina will have made a costly miscalculation that will put it behind its neighbors in providing for the needs of a larger population.
To truly attract and keep new industry, the state needs good schools and universities, a healthy workforce, sound infrastructure and enough amenities to contribute to a high quality of life. If there are states that know how to pay for those things with less tax revenue, we want to know, too. North Carolina may not have found the formula yet.
January 1, 2015 at 12:24 pm
Norm Kelly says:
Sometimes, regardless of how much else I have to do, it's virtually impossible to let drivel slide by. For instance, this appears in this editorial: 'In theory, the money businesses save' when talking about tax CUTS. You see, tax cuts are something that is NEVER favored by libs, socialists, and (redundancy alert!) media types. When every business is allowed to keep more of their money, it's bad. When lib pols get to play games with taxes, what they call 'incentives', then it's good. Libs, and therefore media types, believe that they know better. If they can give one business a tax break, what they call an 'incentive', then they like the tax break. But if pols are taken out of the equation, if pols are not allowed to play games with other peoples money (that's taxes to you & me), then libs don't like the idea. Ideas bad; schemes good. Play games with peoples money good; allow everyone to keep more of what they earn bad.
Couple thoughts come to mind, that would never enter the head of a good lib. First, it is a fact, which is why it's ignored by libs, that businesses DO NOT pay taxes. Every regulation, tax, expense, that any/all government agencies & levels force upon a business is automatically passed on to the customers of said business. There is no choice but to do this. Perfect example: over 20 years ago when I lived in Connecticut, the DEMON-led state legislature wanted to penalize 'big oil' by implementing a gross profits tax on all oil companies doing business in the state. Because they are libs, they believe all profits are gross. The wording of the legislation was that the tax was to be paid by the oil/gas companies because they had windfall profits that were gouging citizens. So the tax was to be paid BY the companies, and it was, according to the legislation, illegal for the companies to pass this tax on to the consumers in the state. But the companies took exception to this targeting in the tax code, where these specific companies were being treated arbitrarily by government, discriminated against, which they claimed was against the law. When it went to court, the court agreed with the companies and struck down the provision preventing the tax from being passed on. Did the legislature then withdraw the legislation? Nope. The libs didn't care that the companies were passing the new tax onto their customers. Because EVERY tax gets passed onto the customers. There is NO OTHER option! So even though the lib pols told us they were concerned about 'average people' what they proved, like every good lib, is that they care absolutely zero about people and ONLY care about how legislation affects GOVERNMENT! We, as citizens, got stuck with a new tax that we were promised wouldn't affect us. And the lib pols refused to repeal the new tax even though it violated their stated goal.
Second thing about tax 'cuts' for business: why is it fair to offer a specific business an 'incentive' but it's immoral and against everything lib to allow ALL businesses to experience a tax cut? What is it about enticing ALL businesses to move to our state that presents a problem for libs? If our state business taxes are lower than our neighboring states, would this or would this NOT encourage businesses to move here? If you lie and answer that lower taxes does NOT encourage businesses to move here, then you are proving the lib lie: they offer 'incentives' because it entices businesses to move here! Please define an 'incentive'. For all you libs who drink the kool-aid, let me help you: an 'incentive' is a targeted tax cut for a specific business which is an outright admission that taxes are generally too high for that specific business to otherwise be enticed to move here. Yes, it's true that our schools MIGHT be better. Our living environment might be better. But since our taxes are out of line, businesses won't move here. So, as good libs, let's offer an 'incentive', through tax cuts, to entice this ONE business to move here. Thereby, automatically and by default, penalizing all other businesses in the state in order to entice this ONE business to do business here. Since government has NO FUNDS of it's own, the only way they can reward one business/group is to penalize another business/group. This is fact. Which is why every lib pol and most lib voters don't believe anything I've typed here!
As for levying taxes, what is the absolute best way to implement a fair, equal tax policy? Sales tax! When I choose to participate in the economy, I pay. But just because I work, I should pay taxes? Doesn't this have a negative effect on working? If I don't work, I don't have to pay taxes? Absurd. But if everything I purchase, absolutely everything, were taxed at the same rate, then everyone who participates in the economy would have a dog in the fight! There are other states that have NO income tax. How do they do it? How does their legislature have money to spend? Or will libs try to claim that every state without an income tax is already bankrupt? If we put a sales tax on every single commodity, and eliminate the income tax, would this be more fair to everyone in the state? Wouldn't implementing a sales tax on EVERY single item be more fair in bringing in money from visitors? People who buy ANYTHING in our state would pay into the sales tax system, but they visit our state and don't have to pay income tax! So, broaden the tax base for sales tax by implementing a sales tax on anything that can be bought or sold. And eliminate the income tax altogether. For persons and businesses. Cuz since businesses do NOT pay taxes, they would all be encouraged to move here, wouldn't they?!
'North Carolina may not have found the formula yet'. This is true. But the fortunate part of the 52 separate states, where experimentation happens, is that we can look to other states that have found a better way and adjust it to meet our needs. Unlike the current community organizer occupier who believes that individual state experimentation is bad, only central planner control is good, the opposite is actually true. If SC has a better way of raising revenue that does the trick and allows people & businesses to thrive, then we can 'copy' their plan. But if, God forbid, Mass. has a better, fairer, more workable plan, we could start to adopt some of their techniques. But the idea is that all 52 states SHOULD be experimenting with what works for their specific needs.
What we DO KNOW is that socialist plans absolutely DO NOT WORK! Raising taxes, offering 'incentives', rewarding one group, penalizing another group, fails every time it's tried every where in the world. Central planner control MUST be eliminated. Government needs to be as local as possible, with as little interference from the next level up as possible. Cary should have more control over Cary than Wake County does; Wake should have more control over Wake than the state does; the state should have more control over the state than the central planners do. What we have with demons, libs, media types, the current occupier, and fortunately the ousted Senator Hagan, is a belief, religious in nature, that says central planner control is the ONLY way to go and it's opportunity to interfere in every aspect of life MUST be increased! Which has failure built in. Which also, by default, removes freedom from everyone, and concentrates power, control, authority in the elites in Washington who believe they are smarter than everyone else. This is the way Obamacancer works: penalize the people who can afford to buy their insurance to reward those people who didn't want to buy insurance in the first place. If central planners can force us to participate in one market, whether we want to or not, what's next? Has any lib answered this question? If they can force us to buy health insurance, what's off limits? Wanna bet not a single lib will answer this question either?!
January 2, 2015 at 1:28 pm
Richard Bunce says:
Let's get through actual Income Tax collection season in April before hitting the panic button. Perhaps withholding was reduced by taxpayers in 2014. Not that the State getting less in revenue is a bad thing... it's just that we do not know yet.
